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Vitacost wants to be the Wal-Mart of Whole Foods

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Vitacost is moving well beyond supplements to offer natural and organic beauty, food, beverage, and pet products at deeply discounted prices. The move is revitalizing the online retailer's image while bringing even more price competition to natural product stores.

With a history in the online supplement market dating back to 1999, Vitacost.com is well known for offering omega-3s, multivitamins and other supplements at prices so low that many traditional supplement retailers often wonder how the company does it. Now under new executive leadership and with more companies entering the competitive online supplement retail space, the Boca Raton, Fla.-based e-tailer is broadening its scope to become the lowest cost purveyor of all non-perishable natural, organic and healthy living products.Vitacost

Backed by the tagline “Take the cost out of healthy living,” Vitacost’s product assortment features not only dietary supplements but also healthy snacks, beverages, baking mixes, ready-to-eat meals and more. The nearly 40,000 products carried by Vitacost include offerings from such brands as Aubrey Organics, Annie’s, Bob’s Red Mill, Seventh Generation and Castor & Pollux, to name just a few.

Vitacost is so serious about broadening its positioning beyond supplements that the company now says it “wants to be known as the ‘Wal-Mart of Whole Foods,’” according to Christine Beggan, a Vitacost PR rep. As Beggan wrote in a recent press release e-mail, the idea is that Vitacost will offer “all the [non-perishable] items found on the shelves of Whole Foods at Wal-Mart prices.” Vitacost promotes discounting its products at up to 50 percent off the MSRP.

Following the money

Vitacost’s focus on expanding its non-supplement business isn’t surprising when you consider where the natural products industry is currently experiencing the greatest growth: in the natural and organic food, personal care and pet categories. “While roughly two-thirds of our business is in the traditional vitamin, mineral, herbs and supplement space, or VMHS, the other one-third of our business is in faster-growing healthy living categories, such as natural beauty and home care, pet products and foods,” Vitacost Chief Marketing Officer David Zucker said in a recent interview with the Wall Street Transcript.

By broadening its product selection, Vitacost has also been able to grow its customer base, Zucker says. “We have seen acceleration in new customer growth over the past year as we started to differentiate ourselves from the competition, specifically in terms of offering an increased selection of SKUs and really driving home the message of our attractive product prices.”

Vitacost is taking other innovative approaches to expanding its customer base. In July 2011, the online retailer began selling its products on Amazon.com. In October 2011, it launched a refer-a-friend program through which existing customers can refer a new customer to Vitacost and both are rewarded with $10 coupons to use on the site.Vitacost supplements

With supplements still generating a lion’s share of sales, Vitacost continues to expand its private-label suite of vitamins, minerals and other supplements. Tapping into the growing “Wholegrarian movement,” Vitacost’s most recent private-label launch is a line of non-GMO, 100 percent vegetarian, whole food-based supplements that include a men’s multi, women’s multi, raw whole food B complex, organic wheat grass powder, and whole food Yaeyama Chlorella.

“We have seen the whole food movement gain significant traction over the past several years with increasing sales of whole food products and superfoods,” said Vitacost CEO Jeffrey Horowitz.  “We are proud to be one of the few companies in the industry today capable of offering consumers a line of whole food-based, non-GMO supplements at attractive prices.”

Following yet another trend that is of growing importance to natural products consumers, Vitacost last month launched a new specialty online store that sells only certified cruelty-free beauty and personal care products. The move came after Vitacost learned from its survey of 1,300 American women that cruelty-free manufacturing practices matter most to beauty shoppers. 

Vitacost bringing more competition for retailers

After the discovery of accounting problems in 2010 , problems with its manufacturing facility and the departure of its founder and former CEO, Wayne Gorsek, Vitacost has been in need of a business makeover—and its efforts to make “healthy living a reality” seem to be paying off.

Under the leadership of new CEO Horowitz (who founded Vitamin Shoppe), Vitacost has been revitalizing its online image by following the trends that are helping to fuel growth for retailers such as Whole Foods Market (whole food-based supplements and cruelty-free beauty products, to name two).

The company reported ending the third quarter of 2012 with 317,000 new customers (a 76 percent increase year over year) and a total of 2 million active customers (up 62 percent from 2011). The average order value of its customers ($74.32) was down 2 percent for the quarter, but Zucker told the Wall Street Transcript in September that lower AOVs have accompanied refer-a-friend program and Amazon sales partnership—both of which helped contribute to Vitacost’s topline growth. “Our average order value, or AOV, actually grew slightly over last year, excluding two very significant programs [Amazon and refer-a-friend] that we initiated in the second half of last year,” Zucker said.

All of this is good news for Vitacost, but it certainly adds to the competitive stress on natural products retailers—which now must face greater online price pressure on more parts of their businesses beyond supplements.

Earlier this year, we spoke with three natural retail experts to gain their tips on how to compete with deep discounters, including e-tailers such as Vitacost. Two great pieces of advice were to stay ahead of customer trends by carrying new items that haven’t made it yet to the online discounters and to provide your shoppers with the kind of special treatment and customer service they can only get in a face-to-face setting.

How do you compete with e-tailers such as Vitacost? Share your stories in the comments below.

Discuss this Blog Entry 7

Anonymous (not verified)
on Nov 13, 2012

As the owner of a small health food & supplement business, this Walmart attitude is not what we need. Many of the brands that we carry, say that they dont like when the e-tailers discount so steeply. But they continue to sell to them anyways? I am tired of all the competition always trying to put everybody out of business.

Anonymous (not verified)
on Nov 14, 2012

Growth, profit, numbers, numbers ,numbers! How about people, quality, and affordable. I'm a small retailer... remember us on Small Business Saturday

Anonymous (not verified)
on Nov 17, 2012

Vitacost is a killer of small independent stores. It's a shame that they exist. I'm sure they don't create many jobs & the ones they do are low wage ones. Maybe it's just a setup- they put health foods stores out of business & then sell themselves to a pharmaceutical company.

on Nov 20, 2012

I believe there's room for all of us. This is the way the people are moving and if we don't stay one step ahead, we'll end up out of the picture. Customer service, local products, knowledgeable staff, easy return policy, fresh food, personal attention to our walk-in customers, giving each of them the best personal experience possible are a few of the ways we can work with the walmarts of the world. 'Cus they're not going away!

nutriutah (not verified)
on Nov 30, 2012

Many people do not have time to ingest everything that is needed to keep their bodies functioning at a high level each day. These individuals are encouraged to turn to liquid supplements and other forms of nutrition supplements to get what they need. Finding a private labeling supplements is important so that you know the quality of products you will be getting.

Anonymous (not verified)
on Feb 13, 2013

Article is lacking any mention of bottom line profit, which I believe is still in the negative for Vitacost. I encourage all retailers to write to their Franchise Tax Boards and demand that Vitacost collect sales tax if required in their state (like in CA, even if it is not enforced.)

Anonymous (not verified)
on Jul 17, 2013

I have yet to find ANY proof of how pure the supplements are at Vitacost or any other supplement retailer. We know that Walmart low-balls everybodies prices but we also know the quality usually isn't there!

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